The current structure of interstate access charges is irrational, and
substantial revision of the Commission's access charge rules is needed. At
present, the price of access to the local exchange carriers' networks bears
very little relation to the way in which the costs of access are actually
incurred - per-minute charges for access are far higher than they should be,
whereas fixed charges are artificially low. As substitutes for traditional
circuit-switched long-distance services, such as packet-switched Internet-based telephony, become more widely available, the regulatory distortions
created by the Commission's rules are increasingly untenable.

Today's restructure of the access charge regime takes some steps in
the right direction, and I concur in those aspects of this decision that permit
price-cap local exchange carriers more fully to recover the fixed costs of the
local loop through flat-rated charges. Indeed, I would have moved even
more aggressively in this regard. I write separately, however, to express my
profound disagreement with three aspects of this order.

The Process Through Which this Order Was Adopted Was
Fundamentally Defective. This order is a product of a proposal that was
originally submitted last summer by the Coalition for Affordable Local and
Long Distance Service ("CALLS"). The Commission sought comment on
this proposal last fall. See Notice of Proposed Rulemaking, Access Charge
Reform, Low-Volume Long Distance Users, Federal-State Joint Board on
Universal Service, CC Docket Nos. 92-262, 94-1, 99-249, 96-45 (Sept. 15,
1999).

In ordinary circumstances, the Commission would simply have
rendered a decision on the CALLS proposal based on comments submitted
by interested parties. The course the Commission took here, however, was
very different. In the early part of this year, apparently prompted by
objections to the original CALLS proposal raised by groups purporting to
represent consumer interests, the Commission, acting chiefly through the
Common Carrier Bureau, held a series of meetings with a select group of
some - but by no means all - of the parties with interests in this proceeding.
The substance of what was discussed at these meetings was not publicly
disclosed. And a number of parties with interests in the outcome of this
proceeding, including the Ad Hoc Telecommunications Users Committee,
Time Warner Telecom, and the Association for Local Telecommunications
Services, were not allowed to participate.

The Commission evidently refereed the negotiations at these
meetings, and a "modified" CALLS proposal was reached near the end of
February. Although this order announces that this "modified proposal" was
put forth by members of the Coalition, see Order ¶ 1, it is undeniable that
the proposal was a product of the negotiations that took place between the
Commission and those parties that were allowed to participate in the
negotiations - that is, members of the Coalition and some groups that
purport to represent the interests of residential and small-business
consumers. The Coalition's "modified proposal" simply memorialized
aspects of the agreement that was reached between these parties and the
Commission in the course of the meetings held in January and February of
this year.

Even more dismaying, however, is what the "modified proposal"
does not disclose. At some point in the course of the CALLS negotiations,
proceedings that were unrelated to the issue of access charge reform became
part of the negotiations. Incumbent local exchange carrier members of the
Coalition apparently contended that they could not commit to certain
modifications of the CALLS proposal unless they had confidence that two
separate matters - a depreciation waiver item
(1)

and the pending special
access proceeding, which concerns the circumstances in which carriers may
purchase combinations of unbundled loops and transport network elements (2)- would be resolved favorably to them. As a consequence, part of the final
agreement reached by the participants to the CALLS negotiations
concerned these two separate matters. With respect to this depreciation
item, the Bureau agreed to recommend to the Commission that it approve
the waiver that is the subject of this Notice and terminate the CPR audits.
Additionally, the Bureau agreed to recommend to the Commission that it
"clarify" the existing rules regarding special access and defer further
rulemaking until 2001. The linkage between these unrelated items and the
CALLS docket was very clear - at least internally. To brief the
Commissioners and their staff regarding the outcome of the CALLS
negotiations, the Bureau distributed briefing sheets outlining the incumbent
carriers' concerns and making plain that the depreciation and special access
matters had become a key part of the CALLS package. Nothing in this
order, however, tells the public of this connection between this order and
these other dockets.

In my view, the process by which the original CALLS proposal was
modified is fundamentally inconsistent with principles of neutrality and
transparency that must govern agency decisionmaking. By participating in
the CALLS negotiations, the Commission plainly reached a view as to how
the CALLS proceeding should be resolved, and its review of the comments
it subsequently received regarding the "modified proposal" could not have
been uninfluenced by the role it had played earlier. In addition, it was
entirely improper for the Commission to have permitted the unrelated
matters of depreciation and special access become part of the negotiations.

If the Bureau thought it would be helpful to narrow the differences
between the various parties with interests in this docket in advance of a
formal rulemaking proceeding, it could legally have done so by following
the framework set forth in the Negotiated Rulemaking Act, 5 U.S.C. § 561
et seq. This statute provides for the formation of a committee that will, with
the assistance of the relevant agency, negotiate to reach a consensus on a
given issue. 5 U.S.C. § 563. An agency that undertakes a negotiated
rulemaking must publish in the Federal Register a notice that, among other
things, (1) announces the establishment of the committee; (2) describes the
issues and scope of the rule to be developed; and (3) proposes a list of
persons that will participate on the committee. 5 U.S.C. § 564(a). In
addition, the agency must give persons with interests that will be affected
by the new rule an opportunity to apply to participate in the negotiated
rulemaking process. Id. § 564(b). If the committee reaches a consensus,
the statute requires it to transmit to the agency that established the
committee a report on a proposed rule. Id. § 566(f). Significantly, although
the agency may nominate a federal employee to facilitate the committee's
negotiations, "[a] person designated to represent the agency in substantive
issues may not serve as facilitator or otherwise chair the committee." Id.
§ 566(c) (emphasis added).

None of those procedures was followed here. The public generally
was not notified that the CALLS negotiations were taking place, nor were a
number of parties that wished to be included in these negotiations permitted
to participate. Not surprisingly, the final CALLS deal does not reflect the
views of parties that were not included in the CALLS negotiations, such as
the Ad Hoc Telecommunications Users Committee. For example, Ad Hoc
has pointed out, in its comments and in a series of ex parte presentations to
the Commission, that the retention of the multi-line business presubcribed
interexchange carrier charge (or "PICC") imposes substantial costs on
multi-line business consumers. See, e.g., Letter from James S. Blasak to
Harold Furchtgott-Roth (May 23, 2000). Ad Hoc contended that the multi-line business PICC is often marked up by long-distance carriers, with the
result that business subscribers pay more than they otherwise would. It
therefore proposed that the multi-line business PICC be consolidated with
the multi-line business subscriber line charge (or "SLC") and billed directly
from the price-cap LEC to the end-user, to avoid a mark-up by the
interexchange carrier. See Order ¶¶ 105-110. Elimination of the multi-line
business PICC would have been consistent with the approach the
Commission took with respect to the residential and single-line PICC.
(Notably, groups purporting to represent the interests of residential and
small-business consumers were at the table when the CALLS negotiations
were held.) But the order declines to take Ad Hoc's approach. Had this
party been permitted to present its views in the context of a negotiated
rulemaking, I think the treatment of the multi-line business PICC might
well have been different. And other aspects of this order would have been
different as well.

Not only were interested parties excluded from the CALLS
negotiations, but also the substance and scope of the CALLS negotiations
was not made public, and there is no public record describing whatever
consensus was finally reached. And, inconsistent with the policy set forth
in 5 U.S.C. § 566(c), the Bureau participated in these negotiations both
substantively and as a facilitator. Had the Commission adhered to the
statutory requirements set forth in the Negotiated Rulemaking Act, I believe
it could have accomplished its goal of reforming the current access charge
regime in a way that preserved its neutrality, allowed representatives of all
interested parties to participate, and kept the public informed about the
process taking place. (3)

To be clear, I do not believe that any employee of this agency acted
in bad faith, nor do I call into question the propriety of public participation
in the Commission's decisionmaking process by making ex parte
presentations. In addition, I believe that the inefficiencies of the current
access charge regime should be eliminated. But I cannot escape the
conclusion that the process by which this Notice has been promulgated falls
short of certain fundamental principles that govern the behavior of
administrative agencies.

The Universal Service Subsidy Created in this Order Is
Illegitimate. This order establishes a new $650 million fund universal
service subsidy mechanism, which will be paid from contributions made by
all interstate carriers almost exclusively to price-cap local exchange
carriers. The Commission claims that this new subsidy is needed to replace
the implicit "universal service" support mechanism currently present in
interstate access charges.

It is important to understand what is occurring with the creation of
this new subsidy. Until now, it has been interexchange carriers that have
paid to local exchange carriers whatever "implicit subsidy" exists in access
charges, and local exchange carriers have used this money to subsidize the
cost of providing certain types of services within a limited geographical
area (typically within a state). Thus, money might flow from a business
end-user to a residential user, both within the incumbent's territory. Under
this new mechanism, however, all carriers that provide interstate services
will fund the access subsidy, and the costs of the subsidy will be spread
nationwide. Thus, a wireless carrier in California (which is not eligible to
receive any support from the $650 million fund) will now find itself footing
the bill to subsidize local exchange carriers nationwide.

I do not think that the creation of this new fund is consistent with the
statute's directive that the Commission "preserve and advance" universal
service support mechanisms. See 47 U.S.C. §254. In my view, the
subsidies present in the existing access charge regime do not come within
the scope of section 254, and the Commission's reliance on section 254 as a
basis for creating this new fund is inconsistent with the statute. Moreover,
the only economically rational way for local exchange carriers to recover
whatever subsidies are currently included in access charges is to increase
the flat fees that subscribers pay for access. Paradoxically, this order
decreases those charges. Although consumers may pay less in flat charges
in the short term, I believe that this order does them a great disservice, since
they will ultimately wind up paying far more to fund the subsidies that this
Commission continues to manufacture in the name of "universal service."

The Commission's Requirement that Sprint and AT&T Comply
with the Commitments these Companies Made in Letters to the
Commission Is Unenforceable. In various letters to the Commission,
Sprint and AT&T have made "commitments" regarding the CALLS
proposal. Among other things, these companies have said they will "pass
through" to consumers the savings that they realize in access charge
reductions and that they will make various rate plans available to different
types of consumers. The Commission orders Sprint and AT&T to comply
with all the supposedly "voluntary" commitments they have made in these
letters. See Order ¶ 247.

In my view, the Commission lacks the power to regulate AT&T's
and Sprint's rates in this manner. As the Commission recognized in 1996,
the long-distance market is a competitive one, and the Commission
therefore no longer regulates the rates of any long-distance carrier. Order,
Motion of AT&T To Be Classified as a Non-Dominant Carrier, 11 FCC Rcd
3271 (1996). In a competitive market, it is consumers - through their
buying power - who tell carriers whether their rates are reasonable or not.
Government regulation is no longer warranted. I therefore do not see how,
even if these carriers fail to live up to their "commitment" letters, the
Commission could possibly find these carriers' rates "unjust" or
"unreasonable."

3.
Even under the Negotiated Rulemaking Act, however, the Bureau could not have promised that
this Commission would abide by the negotiated rulemaking committee's consensus. SeeUSA
Group Loan Servs. Inc. v. Riley, 82 F.3d 708, 714 (7th Cir. 1996).